The S&P/TSX Composite closed at 35,460.27 on September 29, down 0.08% after a 0.87% drop the day before, its lowest close since July 31, according to Yahoo Finance data. For September the index is down 2.2%. The S&P 500 closed at 7,670.84 and is down 0.2% for the month.
The S&P 500 finished the month almost where it started, while the TSX lost 2.2%, and the gap, near 0.8 points on September 22, has held at about 2 points since September 25.
Both indexes are rebased to 100 at the August 31 close. The TSX closed at 35,460.27 and the S&P 500 at 7,670.84 on September 29. The series skips September 7, a market holiday in both countries.
The Gap Is a Gold and Materials Story
Since August 31 the iShares S&P/TSX Global Gold ETF has fallen 7.5% and the iShares S&P/TSX Capped Materials ETF has fallen 6.2%. Most of that came on September 28, when gold December futures dropped 3.5%, from $4,321.20 to $4,168.40, and the gold ETF fell 5.2% in a single session. Utilities lost 3.0% for the month and financials were nearly unchanged at a loss of 0.3%, while technology gained 3.9%, all based on the matching iShares sector ETFs. The weakness is concentrated in resources and not spread across the index.
Yields Are the Common Thread
The US 10-year Treasury yield rose from 4.76% on August 31 to about 5.25% on September 29. On September 23 it jumped 15 basis points to 5.11%, and on that day the TSX fell 1.6% and gold futures fell 1.3%. The Federal Reserve raised its policy rate by 25 basis points to 3.75% to 4.00% on September 16 in a 12 to 0 vote, its first hike since 2023, and the median projection points to 4.1% at the end of 2026, according to Charles Schwab. The next FOMC decision is on October 28, Chase reported.
Gold pays no interest, so a higher yield raises the cost of holding it. HDQ reads the September slide in gold as the market pricing a higher path for real yields, an inference and not a statement from any central bank. Goldman Sachs has held a year-end gold target of $4,900, which implies about 17% from the September 29 futures close of $4,179.70.
Energy Stocks Have Not Followed Oil
Brent gained 13% in September and WTI gained 4%, yet the iShares S&P/TSX Capped Energy ETF fell 2.2%, and it lost another 1.3% on September 29 when WTI settled 3.5% lower at $89.38. Energy equities are not paying for the oil rally. HDQ reads that as investors discounting the Saudi pipeline restart and the chance that the war premium fades, which is an inference.
Two Central Banks Decide on October 28
The Bank of Canada and the Federal Reserve both announce decisions on October 28, nine days after the September CPI release on October 19. The Canadian policy rate is 2.25%, and overnight index swap pricing implied a 59% probability of a 15 basis point hike as of September 25, according to BlueGamma. HDQ reads a Canadian market that carries gold, materials and rate-sensitive utilities as more exposed if both banks lean toward higher rates, and expects US yields to keep setting the direction for gold until those decisions arrive. Both readings are inferences.